Britvic Shares Are In The Drink After Revised Recall Projections

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The share price of Britvic (LSE:BVIC) tanked last week on the recall of Robinsons Fruit Shoot.  They are in the drink again today as the company announced that the impact of the recall is going to be greater than previously expected.  Following the original announcement the FTSE 250 company’s stock dropped 37.50 pence from 334.50 to 297.00 over the following four business days.  Aside from a modest gain yesterday back to 300.20, the price plunged another 44.60p to 255.60, the lowest it has been in over three years.  The share price has fallen over 140 pence, or 36%, since 26 March.  With a plunge like that, Britvic should consider entering the Olympic diving competition.

The July 3rd Recall

Britvic issued a recall notice on July 3rd for Fruit Shoot and Fruit Shoot Hydro packs with a newly designed cap.  The formal reason for the recall was “due to a potential packaging safety issue” whereby some bottle caps may have been damaged during production and which, therefore, could become partially or fully detached.  The company projected a potential financial impact of between £1 million and £5 million in pre-tax profits for this fiscal year, thus prompting the 12.6% drop last week.

Recall Recalculation

Whilst last week’s recall announcement promised a speedy solution and return of product to retail shelves, the company retracted that statement today, saying that they would be replacing the new style cap with an alternative market-proven sports cap, at least in the short-term.  The company now projects that it will take six weeks to begin resupplying, most likely representing the amount of time it will take to arrange for a steady supply of caps and reconfiguring of production equipment.  Unfortunately, the company also said that it will take a full six months to return to normal stocking levels.

This news, of course, makes the financial implications even worse for a company which has seen significant downturn in overall sales due to the extended period of inclement weather combined with consumer spending restraint, especially for non-essential items.  Britvic’s regulatory report today upped the potential pre-tax profit impact to an estimated range of £15 million to £25 million, £5 million to £7 million of which may fall into FY2013.

More to Come

Britvic will release its third-quarter trading update on 19 July, just eight days from now.  More precise figures are expected to be included in that report.

Company Spotlight

Britvic is the second largest soft drink distributor in the UK.  In addition to its own products, Britvic is the UK licensee for Pepsi, 7UP, Lipton Ice Tea, Sobe V Water, and Gatorade.  Its other major brands include Tango, Red Devil, Drench, R. White’s Lemonade, Robinsons, and Purdey’s.  Britvic sells nearly 2 billion litres of soft drink every year.  The company currently employs 3,500 people and exports or franchises its products to 50 odd countries.

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